ALBANY -- The state has made little headway toward building a health exchange, but with $38.7 million in grants, New York still leads the nation in receiving money for one.

"In fact, New York state has probably received more money than any other state in terms of planning for health care reform," said Sen. Kemp Hannon, chairman of the Senate Health Committee.

Health exchanges are supposed to be competitive, state-based marketplaces where individuals and small businesses can purchase affordable health insurance.

The Legislature failed to pass a framework for the state's health exchange before ending its session in June despite pressure to meet federal deadlines for aid to set up the exchange.

But New York hasn't lost any money.

The state has already received $28 million in federal funds to plan for an exchange. When the Legislature ended its session without a health exchange law, the state nonetheless applied for and received a $10.7 million "level 1 establishment grant" in August. The state has until June 2012 to apply for the more lucrative "level 2" grants, which could be worth tens of millions. (Plans to apply for both level 1 and 2 funding at the same time were dashed because of the legislative delay.)

The Legislature must make critical decisions about whether the exchange will merge insurance markets, actively purchase insurance and standardize insurance plans, and then appoint a board and hire staff, Benjamin said.

"They have to find a place to house this exchange, they have to buy computers and set up equipment, establish procedures and protocols and then this exchange has to conduct all these studies and have all these stakeholder meetings around the state," she said.

If the exchange is not operating and certified by the federal government by January 2013, the federal government will take over and run one.

"If we want a New York State Exchange that is New York-built and New York-designed with New York's imprimatur on it, we need to get going and do it now," Benjamin said.

Hannon, a Nassau County Republican, said there is disagreement about the benefit of a state-run exchange. Some believe it would make the insurance system more efficient and benefit consumers.

"We have other people saying 'Do we need to initiate a new program when (resources) are so scarce,'" he said. "We'll continue to have that discussion."

Reach Crowley at 454-5348 or ccrowley@timesunion.com.

Health exchange funding

New York has received $38.7 million to plan and build a health exchange: